Zhonghe (2070) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Zhonghe (China)

Based on various researches at Oak Spring University , Zhonghe is operating in a macro-environment that has been destablized by – geopolitical disruptions, technology disruption, wage bills are increasing, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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Introduction to SWOT Analysis of Zhonghe

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Zhonghe can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zhonghe, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zhonghe operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Zhonghe can be done for the following purposes –
1. Strategic planning of Zhonghe
2. Improving business portfolio management of Zhonghe
3. Assessing feasibility of the new initiative in China
4. Making a Apparel/Accessories sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Zhonghe

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Strengths of Zhonghe | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Zhonghe are -

Highly skilled collaborators

– Zhonghe has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Apparel/Accessories industry. Secondly the value chain collaborators of Zhonghe have helped the firm to develop new products and bring them quickly to the marketplace.

Innovation driven organization

– Zhonghe is one of the most innovative firm in Apparel/Accessories sector.

Superior customer experience

– The customer experience strategy of Zhonghe in Apparel/Accessories industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Effective Research and Development (R&D)

– Zhonghe has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Zhonghe staying ahead in the Apparel/Accessories industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Operational resilience

– The operational resilience strategy of Zhonghe comprises – understanding the underlying the factors in the Apparel/Accessories industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Low bargaining power of suppliers

– Suppliers of Zhonghe in the Consumer Cyclical sector have low bargaining power. Zhonghe has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Zhonghe to manage not only supply disruptions but also source products at highly competitive prices.

Ability to lead change in Apparel/Accessories

– Zhonghe is one of the leading players in the Apparel/Accessories industry in China. Over the years it has not only transformed the business landscape in the Apparel/Accessories industry in China but also across the existing markets. The ability to lead change has enabled Zhonghe in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

High switching costs

– The high switching costs that Zhonghe has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

Ability to recruit top talent

– Zhonghe is one of the leading players in the Apparel/Accessories industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.

High brand equity

– Zhonghe has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Zhonghe to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Digital Transformation in Apparel/Accessories industry

- digital transformation varies from industry to industry. For Zhonghe digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zhonghe has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Training and development

– Zhonghe has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

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Weaknesses of Zhonghe | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Zhonghe are -

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Zhonghe supply chain. Even after few cautionary changes, Zhonghe is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Zhonghe vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– From the 10K / annual statement of Zhonghe, it seems that company is thinking out the frontier risks that can impact Apparel/Accessories industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Slow decision making process

– As mentioned earlier in the report, Zhonghe has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Apparel/Accessories industry over the last five years. Zhonghe even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Interest costs

– Compare to the competition, Zhonghe has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

High operating costs

– Compare to the competitors, Zhonghe has high operating costs in the Apparel/Accessories industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Zhonghe lucrative customers.

High bargaining power of channel partners in Apparel/Accessories industry

– because of the regulatory requirements in China, Zhonghe is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Apparel/Accessories industry.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Zhonghe is slow explore the new channels of communication. These new channels of communication can help Zhonghe to provide better information regarding Apparel/Accessories products and services. It can also build an online community to further reach out to potential customers.

Capital Spending Reduction

– Even during the low interest decade, Zhonghe has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Apparel/Accessories industry using digital technology.

High dependence on Zhonghe ‘s star products

– The top 2 products and services of Zhonghe still accounts for major business revenue. This dependence on star products in Apparel/Accessories industry has resulted into insufficient focus on developing new products, even though Zhonghe has relatively successful track record of launching new products.

Ability to respond to the competition

– As the decision making is very deliberative at Zhonghe, in the dynamic environment of Apparel/Accessories industry it has struggled to respond to the nimble upstart competition. Zhonghe has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Workers concerns about automation

– As automation is fast increasing in the Apparel/Accessories industry, Zhonghe needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

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Zhonghe Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Zhonghe are -

Redefining models of collaboration and team work

– As explained in the weaknesses section, Zhonghe is facing challenges because of the dominance of functional experts in the organization. Zhonghe can utilize new technology in the field of Apparel/Accessories industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Zhonghe in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Apparel/Accessories industry, and it will provide faster access to the consumers.

Better consumer reach

– The expansion of the 5G network will help Zhonghe to increase its market reach. Zhonghe will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Leveraging digital technologies

– Zhonghe can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Apparel/Accessories industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Zhonghe can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Zhonghe can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

Learning at scale

– Online learning technologies has now opened space for Zhonghe to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Buying journey improvements

– Zhonghe can improve the customer journey of consumers in the Apparel/Accessories industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Building a culture of innovation

– managers at Zhonghe can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Apparel/Accessories industry.

Loyalty marketing

– Zhonghe has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Zhonghe can use these opportunities to build new business models that can help the communities that Zhonghe operates in. Secondly it can use opportunities from government spending in Apparel/Accessories sector.

Using analytics as competitive advantage

– Zhonghe has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Apparel/Accessories sector. This continuous investment in analytics has enabled Zhonghe to build a competitive advantage using analytics. The analytics driven competitive advantage can help Zhonghe to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Zhonghe can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Zhonghe to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Creating value in data economy

– The success of analytics program of Zhonghe has opened avenues for new revenue streams for the organization in Apparel/Accessories industry. This can help Zhonghe to build a more holistic ecosystem for Zhonghe products in the Apparel/Accessories industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats Zhonghe External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Zhonghe are -

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Zhonghe business can come under increasing regulations regarding data privacy, data security, etc.

High dependence on third party suppliers

– Zhonghe high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Zhonghe needs to understand the core reasons impacting the Apparel/Accessories industry. This will help it in building a better workplace.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Apparel/Accessories industry are lowering. It can presents Zhonghe with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Apparel/Accessories sector.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Zhonghe.

Regulatory challenges

– Zhonghe needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Apparel/Accessories industry regulations.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Environmental challenges

– Zhonghe needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Zhonghe can take advantage of this fund but it will also bring new competitors in the Apparel/Accessories industry.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Zhonghe can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Zhonghe prominent markets.

Easy access to finance

– Easy access to finance in Apparel/Accessories industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Zhonghe can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Zhonghe in the Apparel/Accessories sector and impact the bottomline of the organization.

Increasing wage structure of Zhonghe

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Zhonghe.

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Weighted SWOT Analysis of Zhonghe Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Zhonghe needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Zhonghe is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Zhonghe is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Zhonghe to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Zhonghe needs to make to build a sustainable competitive advantage.

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